An index model regression applied to past monthly returns in Ford's stock price produces theIn a recent closely contested lawsuit, Apex sued Bpex for patent infringement. The jury came

back today with its decision. The rate of return on Apex was $r_A=3\mathrm{.}4\%.$ The rate of return on

Bpex was only $r_B=2\mathrm{.}8\%.$ The market today responded to very encouraging news about the

unemployment rate, and $r_M=3\%.$ The historical relationship between returns on these stocks

and the market portfolio has been estimated from index model regressions as:

Apex: $r_A=0\mathrm{.}4\%+1\mathrm{.}2r_M$

Bpex: $r_B=-0\mathrm{.}1\%+0\mathrm{.}4r_M$

a$.$ What is the predicted returns for Apex & Bpex? $($Do not round intermediate calculations.

Round your answers to $1$ decimal place.$)$

b$.$ Which company do you think won the lawsuit?

Apex

Bpex

following estimates, which are believed to be stable over time:

$r_F=$

If the market index subsequently rises by $10\mathrm{.}3\%$ and Ford's stock price rises by $9\%,$ what is the

abnormal change in Ford's stock price? $($Negative value should be indicated by a minus sign.

Do not round intermediate calculations. Round your answer to $2$ decimal places.$)$

Abnormal return